I'm the Founder and Managing Partner of Ironfire Capital LLC, which runs a tech-focused hedge fund and angel fund. I did a Ph.D. in Management at the Columbia University Graduate School of Business in New York, with a specialization in Strategic Management. You can follow me on Twitter @ericjackson, subscribe to me on Facebook, follow me on Sina Weibo, or Circle me on Google+. My email is: dr.eric.jackson@me.com

Top Ten Reasons Why Large Companies Fail To Keep Their Best Talent

Whether it’s a high-profile tech company like Yahoo!, or a more established conglomerate like GE or Home Depot, large companies have a hard time keeping their best and brightest in house. Recently, GigaOM discussed the troubles at Yahoo! with a flat stock price, vested options for some of their best people, and the apparent free flow of VC dollars luring away some of their best people to do the start-up thing again.

Yet, Yahoo!, GE, Home Depot, and other large established companies have a tremendous advantage in retaining their top talent and don’t. I’ve seen the good and the bad things that large companies do in relation to talent management. Here’s my Top Ten list of what large companies do to lose their top talent :

1. Big Company Bureaucracy. This is probably the #1 reason we hear after the fact from disenchanted employees. However, it’s usually a reason that masks the real reason. No one likes rules that make no sense. But, when top talent is complaining along these lines, it’s usually a sign that they didn’t feel as if they had a say in these rules. They were simply told to follow along and get with the program. No voice in the process and really talented people say “check please.”

2. Failing to Find a Project for the Talent that Ignites Their Passion. Big companies have many moving parts — by definition. Therefore, they usually don’t have people going around to their best and brightest asking them if they’re enjoying their current projects or if they want to work on something new that they’re really interested in which would help the company. HR people are usually too busy keeping up with other things to get into this. The bosses are also usually tapped out on time and this becomes a “nice to have” rather than “must have” conversation. However, unless you see it as a “must have,” say adios to some of your best people. Top talent isn’t driven by money and power, but by the opportunity to be a part of something huge, that will change the world, and for which they are really passionate. Big companies usually never spend the time to figure this out with those people.

3. Poor Annual Performance Reviews. You would be amazed at how many companies do not do a very effective job at annual performance reviews. Or, if they have them, they are rushed through, with a form quickly filled out and sent off to HR, and back to real work. The impression this leaves with the employee is that my boss — and, therefore, the company — isn’t really interested in my long-term future here. If you’re talented enough, why stay? This one leads into #4….

4. No Discussion around Career Development. Here’s a secret for most bosses: most employees don’t know what they’ll be doing in 5 years. In our experience, about less than 5% of people could tell you if you asked. However, everyone wants to have a discussion with you about their future. Most bosses never engage with their employees about where they want to go in their careers — even the top talent. This represents a huge opportunity for you and your organization if you do bring it up. Our best clients have separate annual discussions with their employees — apart from their annual or bi-annual performance review meetings — to discuss succession planning or career development. If your best people know that you think there’s a path for them going forward, they’ll be more likely to hang around.

5. Shifting Whims/Strategic Priorities. I applaud companies trying to build an incubator or “brickhouse” around their talent, by giving them new exciting projects to work on. The challenge for most organizations is not setting up a strategic priority, like establishing an incubator, but sticking with it a year or two from now. Top talent hates to be “jerked around.” If you commit to a project that they will be heading up, you’ve got to give them enough opportunity to deliver what they’ve promised.

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I’m almost laughing! I would love to see how many commenters think you’re talking about their company / organization. I’m sure you’ve done research into the sizes / disciplines / org. structure of companies and how they’re different as well as the same with respect to each of the items in your list of 10. I had to look at your picture to make sure you weren’t an employee at my company! Dead on why we lose our top talent and the most depressing thing is that most of these top performers that leave are labelled as ‘malcontents’ within weeks of their departure. Scary – very scary…. great article though.

In my last role, the word ‘accountability’ was nowhere to be seen. Left to manage ourselves, due to our remote location, a slacker from another part of the same contract was brought into the office. You’d end up doing his work while he’d play dumb and brush his hair humbly, as if he couldn’t do the job, but all the managers saw was his strength for on-site support. Stick him in front of 10 tickets and he’d only get three done in an entire day, when anyone else could get 30 done in a day. I left, he’s still there – and the kicker is that he was on more money than me because he’d been with the company for 10 years already. Sickening. The role I left is now being shabbily managed by yet another overworked employee. Also, I left one day before I would’ve been due a bonus, I’m sure not a coincidence at all. I won’t mention names, but that company can go take a dive…

Great Article. I think a Reason #11 is Companies laid off a lot great talent over the past few years due to them having the wrong job code at the time of the workforce reduction. Companies tried to reduce headcount in a “fair” way, and really shot themselves in the foot.

I’ve seen countless instances of people who were recently promoted, working on those special projects, or running units that were discontinued. These were the people who had excelled at the “routine work” and asked to take on the heavy lifting and/or take greater responsibilities. For some reason, these babies were thrown out with the bathwater.

I’m amazed at how much great talent is in the marketplace today. Anyone who believes that the low performers were the ones let go is totally mistaken. Instead, what was left behind was the people who excel in situations 1,2,5,8,9, and 10 above- further compounding the problem in the first place.

Great summary. I wonder how many companies can actually implement all 10 on a consistent and sustainable basis? I hope a lot of leaders and HR execs read this and implement the recommendations.

I loved ‘top talent loves other top talent’. I find that often there is poor leadership that is never appropriately addressed in a timely fashion. These weak leaders are often threatened by the high performers and unfortunatley create a poor work environment for top talent. Because of politics, weak leaders get to stay even though they drive their talent away.

There should be mandatory training at companies on how to manage top talent–that would start by making sure all leaders have read your article and put the recommendations into practice–then hold the leaders accountable.

Eric, I loved your article and perspective! I would add one more…Lack of recognition and rewards. When people don’t feel valued and appreciated for their discretionary work efforts, most employees won’t stick around for a manager who is apathetic or unaware…Did you find this topic surface during your research? If so, where did it fall on the list?